Each year in M&A Trends, Torys examines the forces that will
shape business in the year ahead. This year's 10 trends cover
some of the latest developments in M&A, from new deal dynamics
and foreign investment to expanding shareholder engagement.
Take a look at our M&A Trends companion video and read all
10 articles online. You can also access a
full pdf version here.
The year 2014 saw corporate Canada continuing to adapt to the
new realities of shareholder activism. Both activist tactics and
board responses to activist overtures are evolving. We are seeing a
class of activists shift their focus from
"winner-take-all" campaigns to an approach of influencing
change through proposed operational initiatives or specific
transactions. Boards are becoming more responsive to activists'
constructive approaches, increasing the potential for more
negotiated settlements. We expect this trend to continue.
Expanding investor engagement is creating new challenges in
M&A. Public companies looking to grow through acquisitions or
to divest parts of their business are recognizing the significance
of investor support to successful execution of their M&A
strategy. As they continue to respond to greater demands for
transparency, they face disclosure pressures from investors who are
increasingly engaged and less deferential to boards and management.
Separately, dissatisfied investors of M&A targets have, at
least in the U.S., been resorting to appraisal litigation as a way
to improve deal terms, turning it into a form of deal
In contrast to these buy-side considerations, potential M&A
targets can expect to wield more leverage to negotiate deals.
Canadian takeover bid rules are changing to empower boards by
giving them more time to respond to unsolicited bids. These changes
come at a time of growing government skepticism and political
concerns about certain types of foreign investment in domestic
businesses. M&A deals will continue to get done in Canada, but
we predict that bidders will proactively tailor their strategies to
accommodate the changing rules and this new wave of
In the U.S., the Obama administration's clampdown on
inversions is similarly influencing M&A. Although the U.S.
government's anti-inversion rules and proposed measures will
curb some tax inversion structures, we expect that inversion
opportunities for companies seeking to expatriate to other
countries will continue in 2015.
In relation to inbound M&A opportunities, we expect North
America to continue to draw particular interest from Japanese
investors who are looking to overseas markets for investments that
can contribute to their long-term growth and sustainability. The
renewable energy sector represents a natural fit for the growing
pool of acquirors seeking sustainable long-term assets, positioning
the sector well for ongoing M&A activity in 2015. For resource
players, we expect that buyers of Canadian resource development
targets will pay increasing attention to whether appropriate
consultation and accommodation have occurred with local Aboriginal
communities in light of recent court rulings.
Investors considering other M&A prospects in the year ahead
should expect a competitive deal environment. High valuations for
good assets in this seller's market are just one of the factors
encouraging private equity players to pursue co-investment
transactions. We expect the strong demand for co-investments to
continue and accelerate in 2015. In private M&A, sellers
benefiting from the market's recent frothiness may seek use of
the "locked-box" deal structure, which is gaining
popularity, especially in the context of "hot"
Torys looks ahead to the 10 trends that will shape business in
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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